As a credit card user it is important to understand each and every aspect of your credit card statement to avoid unnecessary charges and penalties. Credit card statements will always include the following entries:
· Payment Due Date: Date by which the payment must be received by the bank
· Minimum Amount Due: Minimum amount that must be paid to the bank on or before due date
· Total Amount Due: Total amount due to the bank on or before due date
· Cash Advance: Total amount that was withdrawn as cash advance
· Credit Limit: Maximum spending allowed on the card per credit cycle
· Available Credit: Maximum spending allowed on the card in the next credit cycle
· Points earned: Reward points earned on the spending for that payment cycle.
· Previous Balance: Balance amount rolled over from the previous payment cycle
Below is a sample example.
One of the less understood fields is Minimum Amount Due. What does it really mean?
Minimum amount is the amount that you are required to pay on or before the payment due date else your credit card account can get disabled. Minimum amount is typically 5% of the total outstanding every month (but may vary from bank to bank).
This minimum amount goes higher if you have availed EMI offers on your credit card or have cash advance outstanding from the previous bill payment cycle etc.
When should you pay Minimum Amount Due ?
If for some reason you are unable to pay the Total Amount Due, you must ensure that you pay the Minimum Amount Due by the Payment Due Date. Doing so will help you with the following:
- Avoid late payment charges in addition to the interest payment levied on your outstanding balance. Late payment charges varies across banks.
- You can continue to use your credit card in the next payment cycle although you will be levied high interest (3% - 4% per month) on your outstanding balance from this payment cycle.
- Not paying the minimum amount due is considered default and reported to credit rating agencies like CIBIL, CRIF etc. A bad credit score will make it difficult for you to get a loan of any nature in future. It will also make it difficult for you to get new credit card applications approved.
A Word of Caution:
One must always endeavor to pay the Total Amount Due and not get into habit of paying the Minimum Amount Due. Paying the minimum amount due must be done only on rare occasions when the you really don’t have the ability to make the full payment by the due date. As stated earlier banks levy penalties and very heavy interest on any outstanding amount carried over to the following credit cycle. Besides that, it reflects badly on your credit score. So in a nutshell, while paying the Minimum Amount Due ensures that you are not a defaulter, it has adverse impact on your finances and eventually on your credit score. Hence one must not be lured into this trap.
Another aspect that is not a well understood feature of credit cards is:
What is and when to use Credit Card Cash Advance?
Read here to learn more:
RUSSH team strongly believes in knowledge sharing and best practices with the card user community. In addition to such tips, it also shows all offers and benefits on your credit and debit cards without need for any credit card details. You can try RUSSH App or Chrome Extension at www.russh.in